Transcript of the 2010-11 Budget Address

“A City and State on the Brink”

We at the City of Rochester and the State of New York are at the end of our fiscal rope. We are on the brink of economic calamity. We must implement systemic change if we are to survive without drastically raising taxes or drastically cutting services in the future.

This year, we have managed to close the largest gap this City has ever faced – a full $43.9 million. Despite these dire fiscal constraints our proposed budget maintains core City services. I am proud of this budget. The City historically has been a sound fiscal steward of our taxpayers’ resources, but even we are reaching the breaking point. We see it proposed in our sister cities across the state:

• New York City is closing 20 fire companies and they are eliminating 11,000 jobs through layoffs and attrition. They are closing 50 senior centers and raising their sales tax.

• Yonkers is raising its property tax rate by 4 percent. They are eliminating 91 police officers and 44 firefighters. And, they are cancelling all non-revenue producing parks and recreation programs.

• Syracuse is increasing its property taxes by 5.5 percent to raise $6 million. They are eliminating 34 police officers and 20 firefighter positions and Buffalo is doing away with 43 police officers.

We are in the worst recession since the Great Depression. We have worked hard to be fiscally responsible and have used creative ways to enhance revenues without balancing the budget on the backs of Rochester families whose median household income is only $29,000 a year.

I am proud of this budget, but make no mistake, this is a painful spending plan that requires a great deal of sacrifice. Nothing we do was taken for granted. Every service provided by the City was thoroughly examined to determine if it added value and was worth the expenditure of the taxpayers’ hard-earned dollars.

As I just mentioned, other cities across New York are experiencing significant tax increases and reductions in services and public safety. We reduced our overall expenditures from last year by $15 million – a 3 percent decrease in spending and we managed to maintain all vital services. All City recreation centers will remain open with no change in hours.

All branch libraries will remain open and some hours will be extended. We are not closing a firehouse, nor are we reducing the number of police officers on the street.

This budget keeps taxes flat with a slight decrease of just under one percent in the homeowners’ tax rate. It will reduce the typical homeowner’s tax burden by $7.40. Unfortunately, the state-mandated tax shift over which we have no control will result in a slight increase to the business tax rate. It will rise by 1.4 percent. Last year, we covered the state-mandated shift for businesses, but we simply cannot afford to do so again this year. The state-mandated Maintenance of Effort (MOE) removes my ability to reduce the City school tax levy which accounts for 73 percent of the total tax levy. The City is left to fund such vital government services as police, fire, libraries, recreation centers, and city infrastructure with only the remaining 27 percent of the tax levy.

To add to Rochester's financial challenges, it's important to note that almost one third of our properties are tax exempt, which means they pay no taxes, leaving the rest of us to shoulder the burden.

The proposed property tax rates for 2010-11 maintain our previous efforts to reduce property taxes. During my term, we have leveraged new investments in the city that have led to higher city property values. This along with our reduced spending has enabled me to reduce the homeowners and business tax rate by 7.1 percent and 5.6 percent, respectively since becoming Mayor in 2006. However, this is the last year that I can foresee us balancing the budget by reducing spending and keeping taxes relatively flat.

We took bold steps to close the $43.9 million shortfall. We could have raised the property tax but even that would not have covered the gap of $43.9 million. We have a cap on the line of credit on our bank account and it is called a “Constitutional tax limit” which currently equals $33.8 million. If we chose the easy way out and increased property taxes by 21 percent we still would have fallen short and exceeded our threshold.

Honestly, the stress of the decision kept me awake at night. How do we justify increasing taxes on our working families by fully one-fifth? Families who earn less than $30,000 a year – families, who have to pay rent, clothe their kids and put food on the table? I do not know how they do it. In the end, it was not an option.

The largest single measure was to use $12 million from our reserve fund. This is a doubling of the amount that we used last year to balance the budget. It is the largest use of reserves in current memory and it is not a strategy we should use year after year. If repeated, it could negatively affect our bond rating. This is troubling to me – we are raiding our savings account. I liken it to the same decision that mothers and fathers must make sitting at their kitchen table, struggling to make ends meet in these trying economic times. Except these decisions affect thousands of families.

We enacted departmental efficiencies in the way we do business to save another $9.9 million. Three million of that was saved by eliminating the property tax subsidy for the Parking Fund. We formed an interdepartmental team two years ago and partnered with the Rochester Downtown Development Corporation to formulate a strategy to make the Fund self-sustaining. This team developed a plan to have the City assume the management of City garages enabling an economy of scale, while still contracting out for certain garage services.

We continued on our path of reducing the size of government and saved $3.5 million. The size of the City workforce is now far below what it was during the Truman administration. This will be accomplished largely through attrition and elimination of vacancies. However, there will be pain and my heart goes out to the workers and their families who are affected. Our Bureau of Human Resource Management will do everything in their power to assist them with their career transitions.

We eliminated 99 full-time positions due to efficiencies and departmental budget reductions while we have added 60 new positions to drive future efficiencies and enhance services, resulting in a net City full-time work force reduction of 39 positions. The largest single decrease is the elimination of 15 security positions on road patrol and the largest increase is 12 security positions to assume the role currently provided by contract in City parking garages.

Our hiring freeze limited the number of layoffs to 18 full-time and 5 part-time employees. These layoff figures are expected to go down as individuals bid for job openings and more retirements are finalized. During my four and one half years as Mayor the total full-time workforce has declined by 6.1 percent while the authorized number of sworn police officers has increased by 5 percent.

Clearly our most daunting challenge is the 43 percent increase in what we must pay into the New York State Retirement System to fund our current employees’ pensions. In the coming year, our retirement bill increases $8.5 million from $19.6 million to $28.1 million and could explode to over $80 million by 2014-15, based on rate projections provided by the New York State Retirement System. This looming retirement explosion threatens every city across New York State. It cries out for reform from Albany. The new retirement classification that the Legislature enacted, known as Tier 5, will slowly help moderate these costs, but only as we hire new employees. The cost of existing employee's pensions are not reduced by this change and it does not affect our projected increases.

Regrettably, we must increase refuse, water and local works charges to fund the 43 percent increase in retirement costs. A $10.64 increase in water charges for the average household is proposed. Members of my Senior Management Team continue to work with the Monroe County Water Authority on a possible merger and a water sale agreement. A $16 increase is also proposed for refuse fees. We have previously redesigned our refuse routes to maximize efficiency to keep the refuse charge frozen for three years. Finally, an $18.40 increase is proposed for the local works charge that funds roadway and sidewalk snowplowing, street repairs and sweeping and the replacement of hazardous sidewalks.

In total, these fees increase by $45 per year. These fee increases combined with my proposed $7.40 decrease in the homeowner tax burden results in a $37.64 total increase in burden for the typical homeowner. This amounts to 73 cents per week – less than the cost of a cup of coffee.

These represent the major steps in closing the gap. This pie chart graphically displays the complete actions that were taken to balance the budget. Please take a minute to review the chart.

Despite the grim financial forecast, through efficiencies and reductions we have managed to use our savings and reorganizations to continue on our mission to improve public safety, economic development and customer service. We have creatively funded our priorities and offset our expenses at the same time.

We will be installing 20 red light cameras in the coming year. The first cameras will be operational by September 1. I anticipate this new public safety tool will reduce reckless driving in our city and lessen the number of accidents. We will monitor results and report back to City Council. Anyone who doubts the need for this technology only has to look at this video captured by a red light camera in another city.

I am also pleased to report that a total of 160 overt surveillance cameras will be operational by the end of the fiscal year. I illustrated the value of these cameras in the State of the City – let’s take a second look. This is an actual image from a camera on Jefferson Avenue. It captured a robbery and assault in progress outside a store, during which a gunshot was fired. Shotspotter technology alerted the police, and two squad cars arrived on the scene within 30 seconds. Because of the camera, our officers knew that the suspect had returned to the store – and knew what he was wearing. The suspect was quickly taken into custody and has since pled guilty. Thanks to the quick police response, the victim’s injuries weren’t severe. As the saying goes, a picture, or in this case a video is worth a thousand words – and we will have 20 more online this year.

We have allocated funding to the Fire Department to provide for a 50 percent increase for the installation of more than 2,300 smoke alarms and 2,000 carbon monoxide detectors in residences this year. We will increase the fee for avoidable false alarms to help offset the cost of our enhanced public safety measures.

We have funded 21 new police recruits for the August 2010 class and we currently have 22 recruits in this spring’s graduating class. However, we are deferring our spring 2011 class. We have also eliminated our Security road patrol for the daytime and midnight shifts, saving almost $400,000 – many of these agents will be reassigned to our parking garages.

We will be reducing police overtime by 60 percent which includes special events, saving taxpayers $1.7 million and reducing pension costs. This issue was magnified by a recent New York State Arbitrator’s ruling that assigning on-duty police officers to cover events at the Blue Cross Arena and Frontier Field violates the police contract. The ruling mandates the City pay overtime for police to cover events at those two venues. This will cost taxpayers hundreds of thousands of dollars.

As I have mentioned earlier, the median household income of our city is only $29,000. Those households can ill afford to pay up to $70 an hour per officer for street crossing and other security details at sporting and other events.

While the City disagrees with this ruling, we will respect the Arbitrator’s order and guidelines. In his ruling, the Arbitrator states:

“If the City elects to provide any uniformed officer coverage for events at Frontier Field and sporting events at the Blue Cross Arena, the City is obligated to follow General Order #265’s negotiated agreement to use off-duty officers on an overtime basis assigned by the procedure provided for in General Order #265.”

Since the order states “If the City elects to provide…..” we will now opt not to provide such coverage in the future. While this plan relates to the Arena and to Frontier Field at this time, we will be taking steps to replicate this effort with other non-city sponsored festivals and events.

Sponsors and organizers of these events will realize a cost savings and will have the ability to contract on their own with off-duty police officers at a greatly reduced rate.

Fire Department overtime will also be reduced by 37 percent, saving taxpayers more than $300,000 and reducing pension costs. We will continue the phase-in of the preferred fire response saving more than half a million dollars.

Economic Development is on the rise in our neighborhoods and downtown. We are continuing our commitment to neighborhoods. Instead of spreading development dollars a mile wide and an inch deep, we are targeting four areas – neighborhoods where residents and private investors are working together on turnaround plans. Marketview Heights in northeast Rochester. Jefferson Avenue in the southwest quadrant. The Beechwood neighborhood in the southeast, and the Dewey-Driving Park area in the northwest.

We are literally rebuilding major parts of downtown on a scale not seen here in 50 years. Midtown is a great example. Every day, nearly 200 construction workers are inside, working on the asbestos removal project. A majority are city residents. The Midtown tower itself is going to stay, but as the other buildings are demolished, we open up more than eight acres of prime real estate in the heart of downtown. By 2012, this site will be home to the new world headquarters of PAETEC. The State and the City remain financially committed to the Midtown Rising project.

Funding for the redevelopment of the Port of Rochester continues in this budget. Construction of a parking lot north of the former ferry terminal will begin this fall as part of the development plan for a marina surrounded by housing that will increase our future tax base.

We have made arrangements to sell Canadice and Hemlock Lakes to the state Department of Environmental Conservation. The land will stay forever wild. The City’s primary sources of drinking water will be environmentally protected and the cash we received is helping to fund waterfront development at the Port. Additionally, this action will save taxpayers more than $500,000 in annual operating expenses.

During this fiscal year we anticipate the sale of the corner at Main Street and Plymouth Avenue for new development and we anticipate completing the sale and redevelopment of the former Josh Lofton site. This development will complement the new Nothnagle headquarters relocation downtown and anchor the south end of the Cascade District.

We continue to strive to provide the best customer service available. This year we will fund a mobile literacy vehicle to expand reading opportunities for our children. This initiative will make books readily available at City recreation and daycare centers. We will expand library hours at the Sully Branch located in the new Thomas P. Ryan Center from 36 to 70 hours per week giving kids and their families’ greater access to this valuable educational resource.

A new “Recreation on the Move” program will be funded. This vehicle and new seasonal staff will be a new flexible resource enabling recreation activities to be brought to areas that do not have recreation centers.

Athletes also have more opportunities to enjoy our city this coming year. We will once again fund the Unity Health System Flower City Challenge, which drew more than 2,200 athletes and more than 4,000 spectators to the city for three events over two days last month. In August, we’ll be the host city for the first Tour de New York, a five-day series of competitive cycling events. We are increasing our support by $50,000 in this budget.

We will continue to consolidate. We are currently working on a feasibility study to determine if City civil service functions can be consolidated into the County. I look forward to joining with County Executive Brooks to report on our progress in the future.

Parking responsibilities are fully consolidated. We have taken this function which was once spread over four different departments and placed it under one umbrella. We will assume full day-to-day management of the High Falls, Mortimer, Sister Cities, Crossroads and Washington Square garages eliminating the required annual subsidy, saving taxpayers $3 million.

To eliminate the homeowners and business property tax subsidy of the Parking Fund we will be establishing new rates for City parking. The new charge to park in garages will be $1.00 for the first two hours and meters will be raised to $1.25 per hour.

We are initiating and funding a four-year transformation of our City processes and IT infrastructure. Instead of simply replacing old technology with new technology we are mapping all City processes to identify the most organizationally effective and efficient approach, while simultaneously installing new systems. We do not have a choice but to replace our existing technology since in a few years we will no longer be able to recruit the antiquated skill sets that support the existing infrastructure.

Other efficiencies and necessary reductions will occur in this budget to make ends meet. Police cruisers will receive an oil change every 4,000 miles instead of 3,000 miles to enable brake replacement at the same time. This will save taxpayers $200,000 and reduce down time for police vehicles. We are also deferring the replacement of marked police cars to save $2.2 million.

We will reduce administrative staff. This budget eliminates the entire Office of the Chief of Staff and other senior positions including: Deputy City Budget Director, Deputy Commissioner of Recreation and Youth Services and the Deputy City Assessor. Alone these actions save $630,000 annually. We will also institute greater shared clerical support to reduce costs and our senior managers are starting their third straight year without a pay increase.

Unfortunately, absent the identification of private sponsorship the laser light shows at High Falls will end on September 1, this will save nearly $200,000. We have managed to finance this event through the summer and we are working with area merchants to find an alternate non-governmental funding source.

Downtown bus shelters will no longer be heated due to budget constraints unless RGRTA agrees to pay for these costs, saving the City $18,000. RGRTA has been asked to consider funding this utility cost as a service to their customers.

Residential streets will be swept every six weeks instead of every seven to ten days and arterial streets will be swept every third day, saving nearly $285,000. During the year we will be examining the feasibility of providing recycling every other week to save money. Of course, we will actively seek input from our customers before taking any action. Finally, we will be closing the 3-1-1 Call Center on five major holidays.

• Entertainment will also be affected in this budget. We will:

• Delay the opening of Durand Eastman Beach by one month in 2011;

• The Corn Hill Landing Concert series will be eliminated;

• MusicFest support will decrease to $200,000;

• Jazz Fest support will also decrease to $200,000;

• Support for the Taste of Rochester will be eliminated;

• Funding for the RPO concert series will be reduced;

• And, the next phase of planned improvements to Manhattan Square Park will be deferred.

The one priority area I have not touched on so far has been education. The current educational system is broken. We are failing our children. Our graduation rate has dropped to 46 percent this year, the second lowest of any district in the state. Our dropout rate is 32 percent. Too many students who do graduate are not well prepared for college. Of 346 city graduates who enrolled in MCC four years ago, less than 9 percent received their degree or certificate in the standard two years. Half of the City’s high schools are failing to meet basic standards established under the No Child Left Behind Act. In some Rochester schools, more than 80 percent of the students are failing to attain these basic skills. No one looking at these numbers can suggest that our schools are doing well.

Under the MOE law, city taxpayers are required to give $119 million to the school district this year. That is nearly three quarters of the total property tax levy. Our taxpayers invest $50 million more in education each year than Buffalo, which has a larger district with more students and a higher graduation rate. There was no public input on that law, which passed in 2007, and no referendum. Just a binding commitment on city taxpayers that gives the Mayor and City Council no say on how the money is spent.

Instead, the money is controlled by the City School Board – and when combined with state and federal support, the district spends $18,000-$20,000 dollars per student. It’s fair for taxpayers to ask what kind of returns they are getting for that investment.

Governor Paterson is currently reviewing the school governance legislation that will be introduced in the Legislature at his request. Based on what we have seen the suggested change do not vest control in one person. It is a shared system that will involve the Mayor, City Council, an Education Commission, a Community Schools Advisory Council and an Independent Budget Office. Those who oppose “mayoral control” should be happy because it will involve a broad spectrum of the community and it is not about one person.

I started out by saying that we are on the financial brink – let there be no doubt – it is true. The City and the State are sailing in unchartered waters and we cannot continue to operate with a ‘business as usual’ attitude. We need to change the status quo – if we do not we will be bankrupt – we will end up under a financial control board. Not to advocate for change would be wrong and irresponsible.

It is absurd that within five years the City of Rochester’s pension costs alone could exceed $80 million. It is illogical that our Police Chief cannot assign his officers without using overtime. The current system allows arbitration rulings that can unilaterally impose costs on taxpayers without taking into consideration their ability to pay – or lack thereof. It is incongruous that the State Legislature can commit three-quarters of our property tax revenue to our schools in the dark of night without any discussion.

There are certain lawmakers who are calling for an advisory referendum on school governance – although state law prohibits the funding of such activity. I say let’s call for a referendum and see if taxpayers want to pay $61 million more in state pension costs over the next five years. Let’s call for a referendum to see if taxpayers are willing to pay up to $70 per hour per officer for security services at sporting events. Let’s call for a referendum to see if taxpayers agree with having 73 percent of their property taxes dedicated to a failing system with no say on how their money is spent. I can tell you they would be voted down with a resounding NO.

Please, do not misunderstand me. The very difficult decisions we are being forced to make are not intended to disrespect our dedicated workforce. What I am saying, is that all of us need to respect the taxpayers, who are forced to pay for these bills.

We are losing our ability to govern our financial future due to state mandates. Next year, we will not be able to cut any deeper without mandate relief. We will either have to severely cut services or radically increase taxes. We will drive people from the city in a self-defeating prophecy.

New York State must reform the way cities are able to manage themselves if we want to avoid the inevitable. I do not want the loss of local oversight that would result from a control board, but I welcome the state granting local government the powers of a control board in order to oversee our costs, spending and most importantly, the burden that is being placed on the backs of our taxpayers.

Due to the economy, times have changed dramatically. We cannot continue down the same road that we are on. Reform is needed now. New York State must examine binding arbitration, the Triborough amendment and the Taylor Law to help us maintain financial stability and at the same time respect the contributions of our workforce.

I know these are dramatic steps with statewide implications, but now is the time to step up and act responsibly. We are in the fight of our fiscal lives here and we need measures like these enacted, now. We also need state government to take the handcuffs off of local government if we are to survive in the future. Thank you.